Venture capital financing is at an all time high. Startup CEOs such as Elon Musk or Bill Gates are celebrities on par with the biggest actors and musicians of our generation. Narratives glamorizing startups like The Social Network have become part of our cultural conscience. So it may come as surprise to many to learn that entrepreneurship in the United States has been consistently declining over the past 30 years.
This is in part because most founders don’t fit into the stereotype of a hoodied college dropout (the median new business after one year has raised no money and employs 1 person). However, this trend still holds for the high-tech sector:
A number of explanations have been proposed for the cause of this decline: from increasing fear of failure from would-be entrepreneurs to rising costs involved in starting new businesses while credit to finance new ventures has become more scarce. Some blame ballooning student debt forcing young people to opt for safer jobs, while others point to larger scale trends such as the increasing “greying” of America or the rise of big businesses snuffing out competition. As with most complicated macroeconomic questions, there is no clear answer beyond “probably a combination of all of the above, plus other factors we haven’t even thought of yet.” That being said, I want to introduce one more factor that I think explains a small, but increasingly important part of the story: the rise of startup maximalism.
What is Startup Maximalism?
The coinage is my own, but for all of us in the entrepreneurial community, the ideology of startup maximalism should be familiar. Startup maximalism is “competition is for losers.” Startup maximalism is “that’s just a lifestyle business.” It is supporting the rise of titanic platforms that disrupt our democracy and it is pressuring newer companies to grow unsustainably by spending 40 cents of each dollar raised towards advertising on those very platforms. In short, startup maximalism is the belief that upon founding a new company, it should be your sole goal to maximize the possibility of it becoming as large as possible.
While startup maximalism has led to the rise of large, innovative companies, lately we as a society have begun to see the ill-effects of growth at all costs. Stagnant competition in entire markets. Blatantly anti-competitive behavior towards younger upstarts. A mentality amongst startup founders that leads to a hyper-stressed, all-or-nothing mentality. To see the negative ramifications of these hyper-scale monopolists, look no further than the contrast between the diverse and flourishing enterprise software market versus the tepid, consolidated consumer software market (when was the last time you saw a new social network that had staying power?).
In the next section, we'll talk about how to fight against startup maximalism and build a business to promote economic growth.